This Chapter Explores the Economics of Mass Media and Its Impact On
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Source:Peter Parks/GettyImages. This chapter explores the economics of mass media and its impact on media content, focusing on media ownership, the for-profit orientation of most media, and the role of advertising. A great deal of the media content we consume is produced by media compa nies and most of the media in the United States and other Western democracies are for profit businesses. Like all businesses, they are influenced by issues such as profitability, cost containment, and evolving ownership patterns. To understand the media, then, we must have some sense of the economic dimension of the media industry. (For a more in depth treatment of the economic dynamics that shape the media industry, see Croteau and Boynes 2006; for a focus on the global dimension of media, see Flew 2007.) The types of questions we ask and the general orientation of this chapter build on the framework outlined in Chapter 1. We emphasize a sociological perspective that argues that social structures shape-and are in turn shaped by-human behavior. An emphasis on this tension between agency and structural constraint suggests that human activities and attitudes must be understood in relation to broader social forces. In this case, we cannot understand the media industry without understanding the forces that affect the industry. The individuals and groups that create the television we watch, the music we listen to, the websites we visit, the magazines we read, or the movies we attend are not fully autonomous actors. They do not work in isolation from the social world. Instead, 32 CHAPTER 2 The Economics of the Media Industry 33 they work within the constraints of an existing organization, a broader media industry, and a larger social context. A sociological perspective suggests that we cannot look at media products in a vacuum, either. Instead, we should see media products as the result of a social process of production that occurs within an institutional framework. Some researchers call this kind of institu tional approach -a "production perspective" (Crane 1992; Peterson and Anand 2004) because it emphasizes the media production process rather than either specific media products or the consumption of those products. The production perspective highlights the fact most media products are the result of a complex production process shaped by a vari ety of social structural forces that operate on various levels, some affecting the industry as a whole, some affecting particular actors or groups of actors within the industry. Producers create media products under conditions that are always changing as economic, techno logical, political, and social changes occur in the broader society. Therefore, if we are to better understand media products, we must take into account the historically specific con text in which people create them. Within the explicitly sociological literature, researchers have applied the production perspective most widely to the news media. Therefore, much of this chapter explores the production of news. We also examine several non-news media examples, exploring produc tion processes within the music industry, the film and television sector, the software indus try, and new media technologies. CHANGINGPATTERNS OF OWNERSHIP Who owns the media? This is a central question about the economic organization of media. The assumption behind the question is that owners of the media influence the content and form of media products by their decisions to hire and fire certain personnel, to fund certain projects, to give media platforms to certain speakers, and to develop or support certain technologies. In its least subtle version, such questions might imply a kind of conspiracy theory, in which a small group of powerful owners uses the media to control the thoughts of the rest of us. With its Orwellian connotations of mind control, this extreme version of the ownership question is far too simplistic and therefore not particularly illuminating .. However, a substantial body of research has explored this topic in a more helpful way. Concentration of Ownership One of the clearest trends in media ownership is its increasing concentration in fewer hands. In his classic book, The New Media Monopoly, Ben Bagdikian (2004) argued that ownership of media had become so concentrated that by the mid-2000s only five global firms dominated the media industry in the United States, operating like a cartel. Bagdikian identified the five dominant companies as Time Warner, The Walt Disney Company, Viacom, News Corporation, and Bertelsmann, all multimedia entertainment conglomerates ii that produce and distribute newspapers, magazines, radio, television, books, and movies. According to Bagdikian, "This gives each of the five corporations and their leaders more 34 PA.RTII PRODUCTION Mostof the media productsthat we see, hear, and read are owned by just a handful of major mediacorporations. communication power than was exercised by any despot or dictatorship in history" (Bagdikian 2004: '.3). In the years since the publication of The New Media Monopoly, the media landscape has changed considerably. For example, in 2006 Viacom split into the CBS Corporation and Viacom, Inc. But even in the face of such change, media ownership remains highly concen trated in the 2010s. Within each sector of the media industry, a few large companies tower above their smaller competitors. For example: Movies. The global motion picture industry is dominated by six companies-Comcast's Universal Pictures, Viacom's Paramount Pictures, Time Warner's Warner Bros,, Walt Disney Studios, the News Corporation's 20th Century Pox, and SonyPictures Entertainment. In 2012, Sony led the way with worldwide box office revenues of $4.4 billion, with less than half of its ticket sale revenue ($1. 77 billion) in North America. Its top film, the James Bond movie Skyfall, made more than $1 billion at the global box office. Time Warner was a close second at the global box office, with $4.25 billion in 2012 ticket sales. The remaining four major motion picture companies each brought in more than $2 billion in global ticket sales in 2012: Pox ($'.3.7billion), Disney ($'.3.6billion), Universal ($'.3.1'.3billion), and Paramount ($2.4 billion) (Mcclintock 201 '.3).In addition, some of the leading "independent" film com panies are owned by the industry giants-Pocus Features (Comcast), Fox Searchlight (News Corporation), Sony Pictures Classics (Sony/Columbia), Paramount Vantage (Paramount), and New Line (Time Warner), Television. Unlike other media sectors, broadcast television has become somewhat less concentrated since the 1990s when FOX joined ABC,CBS, and NBC to expand the number of major broadcast networks to four. In 2006, Warner Bros. and CBS partnered to launch a CHAPTER 2 The Economics of the Media Industry 35 5th broadcast network, the CW Network, after the two partners shut down their separate fledgling networks WB and UPN. While cable television has offered the most new program ming, the major cable television channels are often owned by the same companies that own the broadcast networks. For example, Time Warner (co-owner of the CW Network) owns CNN, HBO, TBS, TNT, Cartoon Network, truTV, Turner Classic Movies, and Cinemax. The News Corporation (owner of Fox) also owns FOX News, FOX Business, FX, SPEED,FUEL TV, Fox Movie Channel, Fox Soccer Channel, and National Geographic. Disney (owner of ABC)owns ESPN, Disney Channels Worldwide, A.BCFamily, and SOA.PnetNetworks; and Disney is also part-owner of several other major cable channels, including A.&E,Lifetime Television, the History Channel, and the Biography Channel. The major players in the television industry are leaders in other media sectors as well. Comcast, owner of NBCUniversal,is the nation's largest cable television company and the nation's largest Internet service provider, as well as one of the major players in television pro duction and distribution. In addition, the broadcast television networks and the major movie studios typically share owners. Four of the five broadcast networks are owned by media con glomerates with major film,studios: ABC (Disney), NBC (Universal), Fox (Twentieth Century Fox), and CW (Warner Brothers). And these major movie studios are the leading producers of prime-time programming for network television, accounting for about 90 percent of the series on the major networks (Kunz 2009). This kind of ownership structure makes it very difficult for independent producers to consistently get their programs on broadcast television. Book Publishing. The global English-language book market is dominated by the "Big Five" publishers-Penguin Random House, HarperCollins (owned by News Corporation), Simon & Schuster (owned by CBSCorporation), Hachette Book Group, and Macmillan. Some ana lysts believe that additional consolidation of the book industry is on the horizon (Pfanner and Chozick 2012). U.S. Magazines. Time Inc. (property of Time Warner, which operates, among others, the premium cable television network HBO,Warner Brothers, and CNN)towers above its com petitors. Its 21 U.S. publications in print, online, and via mobile devices reach more than 138 million people (nearly half the U.S. adult population) and control a 21.5 percent share of domestic magazine advertising spending (Time Inc. 2013). J Recorded Music. Only three companies are responsible for the vast majority of U.S. music sales. Universal Music Group, Sony Music Entertafnment, and Warner Music Group accounted for more than 87 percent of total U.S. music sales in 2012 (Christman 2013). (Universal purchased the number four music company, EMI, in late 2012, but European antitrust regulations required Universal to sell some ofEMI's labels. In early 2013, Universal sold Parlophone-the label with rights to albums by a variety of popular artists, such as Coldplay, Radiohead, and Pink Floyd-to Warner Music Group.) Each of the big three con trols a number of smaller labels and local subsidiaries. Radio. Clear Channel, with more than 850 radio stations in 2012, is the dominant player in the U.S.